10 things to know about Insurance in Uganda
"Insurance Law "
Contributed by Rebecca Nakiranda
Shonubi, Musoke and Co Advocates
The insurance industry is regulated by the
Insurance Regulatory Authority of Uganda (IRAU) which is established under the
Insurance Act of 2017.
All insurers (both life and non-life insurers),
insurance intermediaries (such as brokers, agents, risk advisors, loss
assessors, bancassurance agents, third party administrators and reinsurance
brokers) must hold a valid licence issued by IRAU which is renewable on an
To obtain a licence, the insurer, re-insurer and
broker must be a company incorporated under local laws. For a bancassurance
agent to obtain a licence, it must be a financial institution duly licensed by
the Central Bank to conduct financial institution business.
Other than brokers, incorporation of a local
company is not a mandatory requirement for other insurance intermediaries
Conducting general and life insurance business as
a composite business is prohibited.
A foreigner who wishes to carry on insurance
business in Uganda is required to incorporate a local company under the laws of
Uganda and then to apply to IRAU for a licence to conduct insurance business
before applying for a trading licence from the local authorities.
A foreign insurer may be exempted by the IRAU from
the requirement of being incorporated locally for the purpose of providing
There is no prohibition on foreign direct
investment in terms of acquisition of shares in an insurance company. However,
acquisition of the insurance business by any insurance company or any part
thereof requires prior approval of the IRAU.
Change of control approvals
It is mandatory to obtain the written approval of
the IRAU before changing control of an insurance entity by way of share
transfer, or the removal or appointment of directors. Directors and significant
shareholders must be fit and proper.
Any alteration or modification in the memorandum
or articles of association is subject to prior approval of IRAU.
The prescribed minimum paid up capital
requirements is as below
Risk based capital insurers
Life insurers are required to ensure that their
liabilities do not exceed the amount of their life insurance fund.
For non-life insurers or reinsurers, the admitted
assets must exceed the sum prescribed by IRAU or a minimum of 15 per cent of
the premium income net of the reinsurance sessions.
Micro insurance organisations must maintain a
solvency margin of the highest of either 15 per cent of the net written premium
or Ushs50 million.
All insurers are required to establish and
maintain an insurance fund with reserves for unearned premium, outstanding
claims and reserves to cover fluctuations in securities and variations in
All insurers are required to maintain insurance
funds which represent the liabilities of all the policies of the particular
businesses written, for security of policyholders. There exists a
policyholders’ compensation fund that is used to compensate the policyholders
of an insolvent insurer. The fund is managed by a board of trustees appointed
by Minister responsible for Finance. The policyholders’ compensation fund is
funded by premium levied upon the insurers, loans obtained by the government,
grants, gifts and donations or any other source approved by the Minister in
charge of Finance.
Outsourcing of underwriting and
other material functions
The law is flexible and does not restrict
outsourcing insurance functions such as underwriting, claims handling and other
functions. However with regard to the auditing function, prior approval of the
auditor by IRAU is a mandatory requirement.
Regulation of the provision of
Providers of intermediary insurance services are
subject to the approval and due licensing by IRAU. The following are recognised
as insurance intermediaries: insurance agents; insurance brokers; risk
advisors; loss assessors; third party administrators; and reinsurance brokers. The
law restricts intermediary service providers to deal with only licensed
insurance companies. Intermediary services may be conducted by body corporates
or individuals. However, as regards brokerage services (which is also an
intermediary service), no person other than a company incorporated in Uganda is
permitted to carry on a business of an insurance broker. An insurance agent is
prohibited from acting for two or more insurers transacting the same class of
Are there any statutory and
compulsory insurance products that have to be underwritten?
No insurance products have been prescribed for
compulsory underwriting. There are insurance products created by statute such
as, worker’s compensation products and motor vehicle (third party risk)